‘Five stars’ fading for hotels on profit squeeze

Developers are shunning luxury hotels in the U.S. as room rates fail to rebound to peak levels and profits are squeezed by the costs of offering swanky amenities such as spas and trendy restaurants.

Six luxury hotels are expected to open in 2013, the same as in 2012 and down from 23 just three years ago, according to Lodging Econometrics, a Portsmouth, N.H.-based research and consulting firm. Investors are instead focusing on the so-called upscale category, where new properties are forecast to climb 49 percent from last year to 131 hotels.

The decline in construction, combined with conversions of existing properties into cheaper options, signals there may be fewer five-star choices in the future for travelers seeking the highest-quality rooms and amenities. Lower margins for luxury hotels have made them less attractive for property owners, said Steven Goldberg, head of real estate investment banking at Robert W. Baird & Co. in McLean, Va. •

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